Lend Congress some sense

Our opinion: Raising interest rates on school loans is the wrong way to go for a country looking to move forward.

Bear with us. We’re long out of school, and apparently well out of the loop, too. We actually thought relief was on the way for the college students and graduates saddled with loans to the point where their debt exceeds what Americans owe on credit cards.

President Obama had signaled as much, while economists and other politicians were making the case that easing the burden of student loans ranked right up there with the need for mortgage relief. The consensus has been that failure to address either will prevent a full economic recovery.

So what’s the point of doubling the interest rate on the loans that are helping, or already have helped, some 7.4 million people get through college? These are loans — part of the Stafford Loan program, named after former Sen. Robert Stafford of Vermont — specifically aimed at undergraduate students of low and moderate income.

It will take action by Congress before July 1 to keep the interest rates where they are — at 3.4 percent, not 6.8 percent. Pardon us for thinking that this looming deadline and the consequences of ignoring it won’t exactly have the urgency of last summer’s showdown on increasing the U.S. debt limit.

Here’s an irony: We, and those 7.4 million students and former students, are in this predicament precisely because Congress did act responsibly. It voted for a five-year reduction in the interest rate on Stafford Loans back in 2007, when the Democrats were just back in power and unafraid to pursue progressive policies.

The politics of 2012 are so depressingly different. We’ve been through a global financial meltdown that brought new worries about federal spending and debt. Now comes Rep. John Kline, R-Minn., chairman of the House Education and the Workforce Committee, arguing that keeping student loan interest rates at a reasonable level simply delays another day of American reckoning. Either the loans get more expensive, he says, or the taxpayers get hit again.

How dire, then, are the politics of student loans, which have gotten cheaper at what Mr. Kline says is a cost of about $6 billion a year.

Let’s put that in context, before it’s exploited as a rallying cry by those who see college as a tool of the elite, rather than as a tool of progress for many poor and working class families.

Cheaper loans aren’t really cheap, not by the standards of loan rates these days. The looming rate would put a college loan well above a home mortgage.

How many students might decide that an even bigger loan burden — Mr. Obama says it would average about $1,000 a student — is more than they can or want to absorb?

What might be the cost of that, Mr. Kline, when the unemployment rate for people with college degrees is less than half (4.2 percent) that of those without them (9.4 percent)? Or when estimates of how much more college graduates earn in their working lives than non-graduates range from $450,000 to $800,000? Is pushing this cost onto families any way to build an economy?

Shame on anyone in Congress who would even think of messing with a rather modest effort to make a college education more attainable.

7 Responses

The function of student loans is to aid the teaching staff. If it were not for student loans fewer people would go to college and teaching employment would decline. For those who find my view in error try constructing a view that explains both the low teaching load and the admission of students that must take remedial work at the college. (You can find out the extent of the teaching load by getting a schedule of classes from the registrar. )

When you have examined the details of the matter I expect that you will conclude that the practice of academics deciding on academics getting raises you create exploitation of students.

So the federal government continues to drive private lenders out of the student loan industry and, as it nears a monopoly, it boosts the interest rates. Perfect example of why we should be wary of the federal government ignoring constitutional limits and taking over entire private sector industries.

Artificially low interest rates and easy money encourages excessive borrowing, which eventually leads to inflated default rates. In addition, easy college money encourages colleges to raise tuition rates, just as easy mortgage money helped inflated home values. Making less money available for college on less favorable terms will lead many people (most of whom probably shouldn’t go to college in the first place, and will likely incur tens of thousands of dollars in debt before dropping out or graduate with a worthless degree)to opt for a different career path. Fewer people looking for college slots will force colleges to drop their tuition in order to compete. Do we really want to keep college loan rates low and credit easy and create a student loan crisis so soon after the mortgage crisis? Can our economy take another hit like that?

Mine are like Charlie’s. I’ll be well into my 60’s before they’re paid off. (2 graduate degrees)In fact, I’m kind of hoping to die first.
I don’t think they should be forgiven -unless the cost is in no way passed on to the tax payers -and even then, the borrower should have to have paid a certain portion/time period.
I just resent that I will have to pay at least 10 times what I borrowed.

Solution, renege on all student loans then the banks will get a little payback for what they have done to this country and this time hopefully we the taxpayers do not bail them out. That should put a crimp on those big bonuses. Let’s see then if the student loan holders are deemed too big to fail,if so let them fail anyway.